Economist sees better times ahead

Thursday

Feb 7, 2013 at 12:01 AM

STOCKTON - It may not feel like an economic recovery, particularly in San Joaquin County, but there have certainly been gains over the past couple of years, and that pattern of slow growth should continue in 2013, an economist told a breakfast gathering Wednesday.

Reed Fujii

STOCKTON - It may not feel like an economic recovery, particularly in San Joaquin County, but there have certainly been gains over the past couple of years, and that pattern of slow growth should continue in 2013, an economist told a breakfast gathering Wednesday.

With concerns over the European debt crisis fading and the U.S. "fiscal cliff" avoided, at least for now, economic uncertainty has been reduced, said John Mitchell, a Portland, Ore., economist and consultant.

Most likely, the coming year will see national gross domestic product gain of 2 to 2.5 percent and California employment growth of 1.5 to 2 percent, he said in his economic forecast, presented annually by the Bank of Agriculture and Commerce

That spells "a pickup and a continuation of economic expansion as we move through 2013," Mitchell said.

There are possible snags that could spoil that prediction. He cautioned about two things in particular: global unrest, such as a flare-up in violence in the Mideast, as underlined by recent reports of Israel bombing a Syrian military site, or Japan and China feuding over territorial rights to some isolated islands; and continuing policy disputes in Washington.

Mitchell said a decision over the federal spending cap was delayed, not resolved, and a government shutdown is not out of the question. Although, he added, "My sense is you might get cooler heads to prevail."

Mitchell said popular myths that we can have free medical services, no new taxes, the rich pay all the taxes, and entitlements, such as Social Security and Medicare, will remain unchanged.

Mitchell's thoughts are shared by most other experts, said Mark Plovnick, economic development director at University of the Pacific.

"All the things I've read recently and the economists are saying similar things," he said after attending the breakfast.

Plovnick also agreed federal officials face a dilemma in trying to boost economic activity while reducing the deficit and sustaining Social Security, Medicare and other benefit programs.

"The challenge is to tackle the long-term issues without doing much damage to the economy in the short term," he said.

There remain nagging questions.

"There's lots of gloom and doom, which I think is probably overdone," Mitchell said.

Much of that stems from the report that GNP growth stalled in the fourth quarter, actually slightly declining, by 0.1 percent.

However, the economist took pains to explain that drop was nearly entirely due to two exceptional events: a drop in defense spending and a steep decline in business inventories. He expects neither to be repeated.

"You're going to see a pickup in the growth rate in the first quarter," Mitchell said.